Paul,
SGI to ship a 128 Pentium /// CPU Cluster SuperComputer !
Yes. All of these clustered systems announcements and shipments are interesting, but do we ever hear back how they actually perform? That is a lot of Xeons in one place, though. SGI is "restructuring" again, de-emphasizing NT and Cray. Wonder if they're going to continue to stand on their own, get bought out, or what? You could almost see it coming on their NT workstations. They are very elegant with great graphics, but they cost more than the Dells, HPs and IBMs. And, SGI is not known as an NT house, so they didn't sell.
infohq.com
SGI Bids Adieu to NT in Latest
Restructuring
By Brian Graney
August 10, 1999
When visual workstations and technical servers maker Silicon Graphics
(NYSE: SGI) sent investors hearts a-flutter earlier this year with its
decision to embrace Wintel technology and enter into the crowded
Windows NT space, a fellow Fool wondered whether the company's
proprietary enhancements to NT would provide the competitive advantage
needed to restore SGI to its former place as a darling of the U.S. computer
industry. Today, SGI answered that question with a resounding "No."
In a flurry of press releases this morning, SGI said it is shaking up its
business yet again in an effort to find its proper place in the computing
environment of the future. And apparently, Windows NT does not fit into
the picture anymore. The company said it has reached a "preliminary
understanding" with an unnamed company to share the development and
distribution load for its Visual Workstation NT-based machines, which
are all of seven months old.
Far from being the growth firecracker that some investors had expected,
SGI's first Wintel offerings turned out to be a dud. Fiscal Q4 sales of the
NT workstations came in at $50 million, or at the absolute low end of the
$50 million to $100 million range that had been forecasted. That was up
from $35 million in the prior quarter, but not enough to secure the low-end
market's place as a primary future revenue driver for the business.
The company's Cray supercomputing unit, which represented less than
10% of total revenues in the most recent quarter, will meet a similar fate
through the formation of an operating partnership with an outside company
or some "other transaction." In connection with the reorganization of the
two business units and others, some 1,000 to 1,500 jobs will be
eliminated and an undetermined number of employees will depart to staff
the new joint ventures and alliances in the works.
The remaining 8,000 or so SGI employees will concentrate their efforts on
broadband Internet computing opportunities and mid-range servers running
the Linux operating system. By narrowing its focus, SGI's 18-month-old
management team finally seems to have settled on a business model that it
likes. At the same time, however, the narrower focus on mid-level servers
and workstations places SGI dead in the sights of larger players such as
Sun (Nasdaq: SUNW) and Hewlett-Packard (NYSE: HWP).
So, it seems the firm is back to square one in terms of its business plan.
Meanwhile, today's share price drop has left investors no better off than
they were two years ago amid an earlier restructuring, which included the
first round of layoffs in SGI's history.
The lesson to be learned from SGI's recent past is this: Great companies
generate higher earnings and create shareholder value by cultivating and
protecting competitive business advantages. Investors may be looking
forward to an encore presentation of SGI's Q4 earnings surprise in the
current quarter, but any sustained earnings growth hinges solely on SGI's
ability to create some kind of an advantage for itself in its new, narrower
business lines. |
